WILSON: Fiscal cliff sequel is coming soon with focus on spending, debt ceiling

Posted: Jan. 4, 2013 2:02 pm Updated: Feb. 15, 2013 5:15 pm

Congress didn't really avert the fiscal cliff last week.

Lawmakers made several middle class tax cuts permanent. They extended emergency unemployment insurance benefits, let Social Security collections rise to normal levels and did a handful of other things.

They didn't decide how much to cut defense and domestic spending programs. Those decisions must be made by the end of February.

Congress simply steered the ship of state down a small slope on the way toward a bigger and more contentious fiscal cliff to come.

Sequestration -- as a series of huge automatic cuts in government programs has been called -- was set to take effect in January after a congressional Super Committee failed to reach an agreement on taxes and spending cuts in November 2011. The Super Committee laid out a scenario members hoped would force bipartisan efforts. Democrats, they reasoned, would be interested in avoiding huge spending cuts in domestic programs, and Republicans would try to avoid tax hikes and large cuts in defense spending. Surely they would hammer out an agreement, the strategists thought in late 2011.

That didn't happen and tax reform passed last week with just enough Republican votes to avoid lots of the tax hikes. Taxes on couples earning more than $450,000 rose to 39.6 percent. Capital gains tax rates edged up and taxes rose on estates of more than $5 million.

Democrats in Congress wanted bigger tax hikes, but were only able to win a certain amount of GOP support from legislators who were worried about how the national economy, the stock market and voters would react.

In February there will be less pressure on anybody in Congress to give ground on spending cuts or raising the national debt ceiling.

President Obama tried to make the most of the tax hike vote. He said the vote will strengthen the economy. Obama also gave a nod to the sequestration/debt ceiling battle to come, saying he hopes the next round of debates can be conducted with "a little less drama, a little less brinksmanship, and not scare folks quite as much."

A majority of Americans probably would agree with those sentiments. Sadly, there is going to be drama, brinksmanship and scary times ahead.

Obama and the Democrats gave up their leverage with the tax vote. They have less with which to bargain on sequestration. While Republicans have traditionally pushed for strong defense, many of the 51 members of the Tea Party Caucus in the U.S. House see cuts in spending as a higher priority than military appropriations. Many of them may be willing to see some defense cuts as long as domestic programs are trimmed back.

The debt ceiling talks also will guarantee divisive debate just as lawmakers and the White House are working on spending cuts.

Americans who got tired of the hype with the fiscal cliff need to be prepared for the sequel. Fiscal Cliff II in 3D is going to be the next big thing.


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